Congressmen Say Toyota Misled Public About Recalls

TOKYO – House investigators believe Toyota intentionally resisted the possibility that electronic defects caused unintended acceleration, and then misled the public into thinking its recall would fix all the problems.

Representatives Henry Waxman and Bart Stupak, chairmen of the House Energy and Commerce Committee and the panel's investigative subcommittee, respectively, also said documents and interviews demonstrate the company relied on a flawed engineering report in its statements to reassure the public.

In a letter to the company, Stupak said a review of consumer complaints produced by Toyota shows that company personnel identified sticking pedals or floor mats as the cause of only 16 percent of the unintended acceleration reports.

Also Monday, federal prosecutors opened a criminal investigation into Toyota's safety problems, the company acknowledged Monday as it prepared to answer questions on Capitol Hill about its widespread vehicle recalls.

The Japanese automaker said Monday it received a subpoena from a federal grand jury in New York seeking documents related to unintended acceleration in its vehicles and the braking system of its Prius hybrid.

Toyota also said it received a subpoena and a voluntary document request from the Los Angeles office of the U.S. Securities and Exchange Commission. The SEC is seeking documents related to unintended acceleration as well as to its disclosure policies and practices, Toyota said.

The subpoenas are the latest demand for documentation from Toyota. Over the weekend, the company turned over documents to congressional investigators, with some boasting it saved money by obtaining a limited recall from regulators in 2007.

The documents could create a big challenge for Toyota President Akio Toyoda, who is scheduled to testify at a House Oversight and Government Reform Committee on Wednesday. Two House committees are holding hearings this week on the Japanese automaker's recall of 8.5 million vehicles since the fall to deal with safety problems involving gas pedals, floor mats and brakes.

Toyota said it received the grand jury request from the Southern District of New York on Feb. 8. It received the SEC requests on Friday. It disclosed the latest requests in a filing with the SEC on Monday and said it intends to comply with the requests.

Toyota declined to comment beyond its disclosure with the SEC.

A spokeswoman with the U.S. Attorney's Office for the Southern District of New York declined to comment, saying it does not confirm or deny its investigations as a matter of policy.

The government could be looking into product safety law violations or whether Toyota made false statements to a federal safety agency, the National Highway Traffic Safety Administration, involving unintended acceleration or the Prius braking system, said Peter Henning, a law professor at Wayne State University in Detroit.

"In their prior submissions, if there were false statements made in there, that could be the basis" for the investigation, said Henning, a former Justice Department and SEC lawyer. In addition, the SEC likely is looking into whether Toyota disclosed all of its problems in required regulatory filings, he said. Both agencies could be working together as well, he said.

Eric Dezenhall, a crisis management consultant in Washington, said the subpoena might cause Toyota to limit its testimony because apologies are admissible in court.

"On one hand, heavily-lawyered testimony may anger members of Congress," Dezenhall said. "On the other, no matter what Toyota does, their testimony will be deemed inadequate. That's just the nature of the beast. Congressional hearings are not fact-finding missions, they are scolding forums. Toyota's goal is to survive, not 'win.'"

He predicted that in this week's congressional hearings, company officials would walk a line between testimony carefully phrased to avoid legal liability, and enough disclosure to describe the cars' mechanical problems and the steps Toyota is taking to make the vehicles safer.

A spokesman for Rep. Darrell Issa, R-Calif., a top Republican on the House Oversight and Government Reform Committee, said the actions by the SEC and U.S. Attorney's Office don't change the Committee's expectation for a transparent and candid discussion with Toyoda.

"Toyota has maintained they have nothing to hide and we expect them to provide straightforward and honest testimony," said Kurt Bardella, a spokesman for Issa.

Claims by Toyota in internal documents that it saved money by obtaining a limited recall from regulators in 2007 will also create problems for the automaker's president when he testifies before U.S. lawmakers this week.

Toyota, in an internal presentation in July 2009 at its Washington office, said it saved $100 million or more by negotiating an "equipment recall" of floor mats involving 55,000 Toyota Camry and Lexus ES350 vehicles in September 2007.

The savings are listed under the title, "Wins for Toyota — Safety Group." The document cites millions of dollars in other savings by delaying safety regulations, avoiding defect investigations and slowing down other industry requirements.

The documents could set off alarms in Congress over whether Toyota put profits ahead of customer safety and pushed regulators to narrow the scope of recalls.

"You can feel that the staff were thinking more about company profits than customers," Mamoru Kato, an analyst at Tokai-Tokyo Securities, said in an e-mail after viewing the documents.

The documents were turned over to the House Oversight and Government Reform Committee — which is scheduled to hold a hearing Wednesday — and obtained by The Associated Press on Sunday. The presentation was first reported by The Detroit News.

The world's largest automaker has been criticized for responding too slowly to complaints of sudden acceleration in its vehicles that are threatening to undermine its reputation for quality and safety.

Toyota said in a statement: "Our first priority is the safety of our customers and to conclude otherwise on the basis of one internal presentation is wrong. Our values have always been to put the customer first and ensure the highest levels of safety and quality."

The internal presentation was dated July 6, 2009, less than two months before a high-speed crash near San Diego killed a California highway patrol officer and his family and reignited concerns over sudden acceleration in Toyotas.

In October 2009, Toyota issued its largest-ever U.S. recall, involving about 4 million vehicles, over concerns of pedals getting stuck in floor mats.

The documents also show a company expecting tougher regulation under the Obama administration.

Toyota highlighted some challenges it faces, including an "activist administration & Congress — increasing laws & regulation," "massive government support for Detroit automakers" along with "continuing economic difficulty."

Under a heading titled "key safety issues," Toyota called the Transportation Department and NHTSA under Obama "not industry-friendly" and said the auto industry expected "a more challenging regulatory and enforcement environment."

The presentation lists Yoshi Inaba, Toyota's chief executive in North America, on its cover. Inaba is scheduled to testify before the House Oversight Committee on Wednesday, along with Toyoda. The committee is also expected to hear from LaHood, NHTSA Administrator David Strickland and safety advocates.

The House Energy and Commerce Committee is holding a hearing Tuesday with Jim Lentz, president of Toyota Motor Sales USA, LaHood and Strickland. A Senate committee is planning a March 2 hearing.